Seller is trying to keep Escrow money even with inspection contig

15 Replies

We are under contract for a house in Cleveland area we had inspection contingency after looking at disclosure and price point we decided to move out of the contract. before removing inspection contingency. Now seller wants to keep escrow money. 

My agent dont tell me where the money is. is it on the escrow account, he is holding or with someone else or to seller. He waited for two days until check is cleared and now he  is not responding to my call and emails (not answering my question)

Any help will be greatly appreciated.

@Rahul Bhatt

Get your attorney involved. When you wrote the check for the EM, who did you write it to?

That's where your escrow money went. 

Originally posted by @Chris T. :

@Rahul Bhatt

Get your attorney involved. When you wrote the check for the EM, who did you write it to?

That's where your escrow money went. 

 I wrote to my broker.thats what I am thinking now. My biggest question is who decide we are right or seller is right. 

@Rahul Bhatt

It depends on your contract that is signed by both you and the seller. That's why your attorney has to get involved.

You do have a buyer's attorney, don't you? 

Originally posted by @Chris T. :

@Rahul Bhatt

It depends on your contract that is signed by both you and the seller. That's why your attorney has to get involved.

You do have a buyer's attorney, don't you? 

 I will find one thanks

Assuming the transaction is in California, you might want to review http://www.dre.ca.gov/files/pdf/Escrow_Info_Consum....

"Because an escrow officer may only act on instructions and documents agreed to by the parties to a transaction, if a dispute or disagreement occurs, the escrow officer must remain neutral and will not proceed until the parties have reached a mutual agreement. (p. 14)

Before the escrow officer can release any funds, the parties must agree to the disposition of the funds in writing. This instruction will include the payment of any applicable fees or charges incurred by the escrow holder or other costs indicated in the escrow instructions. In some cases, the escrow officer may charge an escrow cancellation fee, if such a fee had been disclosed and agreed upon by all parities in the escrow instructions. 

If there is no agreement between the parties as to the disposition of funds on deposit, the escrow officer will not release any funds until an agreement is reached in writing. In cases where the parties cannot agree to cancellation or to related terms, the disposition of funds, and/or are unable to resolve a dispute, the escrow holder may have to file an interpleader action in court and a judge will have to decide which parties are entitled to what documents and/or funds." (pp 20-21)

This process is similar in many states (for example, it's pretty much identical in Florida). This is a risk all investors, and particularly wholesalers, need to be aware of. Just because the contract says you should get your deposit back, doesn't it happens automatically. The seller has to sign off on it, and a disputed escrow could tie up your funds for weeks/months.

It's quite simple to determine who is entitled to it......read your contract.  You would have had a set number of days to cancel the contract under the inspection clause, in order to get your EM back.

earnest money is either held with the title company or the brokers account. 

You should have a copy of the contract and it will state where it is held.

EM will be held for two years if a resolution is agreed by both parties and then returned to the seller in the state of Ohio

This post has been removed.

Thanks You mean it goes back to buyer after two years or seller ?Originally posted by @Federico Gutierrez :

earnest money is either held with the title company or the brokers account. 

You should have a copy of the contract and it will state where it is held.

EM will be held for two years if a resolution is agreed by both parties and then returned to the seller in the state of Ohio

@Rahul Bhatt , is your agent also the listing agent (i.e. dual representation)?

If so, things can get a little complicated. Otherwise, tell him if he does not return your call you are going to file a complaint with the Realtor board in OH.

Originally posted by @Percy N. :

Rahul Bhatt , is your agent also the listing agent (i.e. dual representation)?

If so, things can get a little complicated. Otherwise, tell him if he does not return your call you are going to file a complaint with the Realtor board in OH.

 Actually his broker called and explained things Nicely so I feel better from communication front 

Two different issues at play here:

1) Contractually/legally: whether you are entitled to return of the EM

2) Leagl procedure for releasing the EM to either party: in most jurisdictions, without a signed release from Both parties agreeing to release of the EM to a certain party, the firm holding the EM can Not release it.  It may call for arbitration, or a court ruling.  Some states, like FL have a procedure to bypass this thru a ruling from the RE commission, Only if the EM is held by the RE broker.  If held by a title co., off to court you go.

It appears you pulled out of a contact prior to even reaching the phase of 'contingent on an inspection'.  I hope you find resolution, but next time be sure to go ahead with the inspection before backing out or else have more contingencies. 

Read your contract closely and get the assistance of an attorney as already mentioned.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here